Auditor evidential planning judgments;

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Auditor Evidential Planning Judgments
Arnold Wright
Northeastern University
Theodore J. Mock
University of Southern California
Abstract
The effectiveness and efficiency of an audit rests largely on the nature and extent of evidence gathered, yet there is little research on how auditors make such complex judgments required to plan audits. This study examines the evidential planning decisions of 21 experienced auditors in an experimental setting. The Analytical Hierarchy Process is employed to explicitly investigate the multi-attribute trade-offs made in such judgments.
The results indicate that auditors displayed strong consensus as to the relative importance of key criteria suggested in the professional literature to weigh evidential alternatives. Specifically, competence was considered of greatest concern, followed by sufficiency and costs of gathering the evidence. But in applying criteria to an audit case, the auditors reached quite different conclusions regarding the relative superiority of alternative procedures when evaluated along the various criteria. Differences were also observed concern­ing
the appropriate allocation of audit time, suggesting substantial variations among auditors in the planned portfolio of procedures across engagements.
Introduction
Evidential planning regarding the nature, extent, and timing of procedures entails critical judgments that greatly impact audit effectiveness and efficiency. The audit planning process should result in a cost-effective portfolio of procedures which are likely to identify material errors at an acceptably low level of audit risk.1 In deciding upon an appropriate plan, a number of broad categories of procedures, such as detailed tests, analytical review, and observation are normally available. These procedures vary qualitatively and quantitatively along a number of criteria such as competency, sufficiency and cost [SAS 31, AICPA, 1987]. The auditor's task is to select a combination of these procedures to conduct in order to gather sufficient, competent evidence to support an overall opinion on the financial statements. Therefore, evidential planning judgments represent complex, multiple-criteria decisions.
1 Audit risk is the risk that the financial statements are materially misstated without the auditor's
knowledge (SAS 47).
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